Commerce Lexington Inc. Blog

​The third week of session was marked by a flurry activity. Hundreds of bills were filed as the deadline to introduce new legislation passed. In total, nearly 800 bills have been in introduced for the 2017 Regular Session. Historically, less than 10 percent of bills make it through the process and become law.

Several bills important to Commerce Lexington Inc. advanced in the process this past week. The most notable bills included legislation addressing reforms to K-12 education standards, workers' compensation reforms, modernizations to laws to help the distillery industry, efforts to curb the opioid epidemic through prevention and enforcement changes, and establishing a baseline for transparency, accountability and oversight practices for all Area Development Districts (ADDs).

Legislators return today for day 15 of the 30-day session.

Click here to view a more comprehensive list of the bills Commerce Lexington Inc. is tracking on behalf of our members.

On January 3, state legislators returned to Frankfort to begin the 2017 Regular Session of the Kentucky General Assembly. The initial five days of the 30-day (short) session were marked by unprecedented activity, such as the swearing-in of a new Republican majority in the State House of Representatives and the passage of seven pieces of legislation. Most notably for Commerce Lexington Inc. members was the passage of HB 1, making Kentucky a Right-to-Work (RTW) state, and HB 3, repealing the state's prevailing wage laws.

​For the first time in Kentucky's history, the GOP holds the Governor's office and super-majorities in the State House (64-36) and State Senate (27-11). Republican leaders, including Governor Matt Bevin, newly-elected House Speaker Jeff Hoover (R-Jamestown) and Senate President Robert Stivers (R-Manchester), wasted no time in advancing policy priorities efficiently through the legislative process. It takes a minimum of five days for a bill to become law. The legislature met in a Saturday session for a 5th day to ensure these bills made it to the Governor for signature as quickly as possible.

The Kentucky Supreme Court struck down the City of Louisville’s minimum wage ordinance by a 6-1 vote, ruling that the state, not a city, has the authority to raise the minimum wage. Because Kentucky has comprehensive state statutes regulating wages, the Court concluded that municipalities cannot enact conflicting ordinances. Kentucky’s state minimum wage is $7.25 per hour, which is the same as the federal minimum wage.

The Supreme Court ruling addressed Louisville’s ordinance in particular, but it would apply to any local government’s ability to enact these local minimum wage ordinances, including Lexington. As a result, Lexington’s mandated minimum wage increase is no longer valid. The minimum wage in Lexington and Louisville will revert back to $7.25 per hour.

In 2015, several business organizations filed suit against the City of Louisville after it passed an ordinance increasing the local minimum wage above the state and federal level of $7.25 per hour.

In November 2015, the Lexington-Fayette Urban County Council passed a similar ordinance to the City of Louisville with a higher ultimate wage, increasing Lexington's minimum wage from $7.25 per hour to $10.10 per hour over a three-year period. The ordinance went into effect on July 1, 2016 with the first mandated increase to $8.20 per hour.

FOR MORE INFORMATION:If you are an employer and have questions, please contact the City of Lexington’s Department of Revenue at (859) 258-3340. To read the Kentucky Supreme Court opinion on-line, CLICK HERE.

Commerce Lexington Inc. remains committed to working with the Mayor and Urban County Council members to find alternative policy solutions that will help lift families out of poverty more effectively, without hurting businesses in Lexington -- such as through education and workforce training efforts.

EDUCATIONAL SESSION ON OVERTIME RULE:Allison Moreman, an associate in Jackson Kelly’s Litigation and Commercial Law Practice Groups with expertise in employment law, and Brian Simmons, a human resources advisor with CMI Consulting, are hosting an educational session entitled “New Overtime Exemption Rules: What Does It Mean For You?” on Friday, September 23 from 9:00 – 10:30 a.m. (Registration & breakfast at 8:30 a.m.) at Commerce Lexington Inc.’s first floor conference room. There is no cost to attend this session. RSVP to jessica@cmiconsulting.com.

On May 18, 2016, the Department of Labor released the final updated version of the regulations governing which executive, administrative, and professional employees are entitled to overtime pay protections under the FLSA. The regulations were last updated in 2004.

The final rule makes the following changes to the overtime exemption qualifications:

Increases the standard salary threshold for overtime eligibility for full-time workers from $455 to $913 per week ($47,476 per year). This is the 40th percentile of weekly earnings for full-time workers in the lowest-wage Census Region.

Allows employers to use nondiscretionary bonuses and incentive payments, including commissions, paid at least quarterly to satisfy up to 10% of the new minimum salary level.

Increases the total annual compensation requirement needed to exempt highly compensated employees ("HCE") from overtime eligibility to $134,004/annually (increased from $100,000). This amount is the 90th percentile of earnings of full-time salaried workers. The employee must also be paid their annual compensation at least $913 weekly and pass a minimal duties test.

Includes a mechanism to automatically update the standard salary level requirement every three years to ensure that the salary level test remains realistic. The standard salary level will be updated to maintain a threshold equal to the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region. The DOL will publish all updated rates in the Federal Register at least 150 days before their effective date and post them on the Wage and Hour Division's website.​

Plan Will Evaluate More Than 4,500 Regulations to Simplify Doing Business in Kentucky

​Kentucky Governor Matt Bevin recently announced the Red Tape Reduction Initiative. Through this effort, the Gov. Bevin is committed to eliminating or revising outdated and unnecessary state regulations that hamper business growth in Kentucky.

Gov. Bevin is also asking for business leaders to help his administration identify burdensome regulations that need to be eliminated or changed to make it easier for businesses to operate in Kentucky.

The governor has already instructed state cabinet secretaries to start a review of all government regulations currently on the books. For more information on the initiative or to submit a suggestion on a regulation that should be reviewed, visit www.RedTapeReduction.com.

The Lexington-Fayette Urban County Council has passed an ordinance increasing the minimum wage over a three-year period from $7.25 to $10.10 per hour in Lexington-Fayette County. The first increase to $8.20 per hour went into effective on July 1, 2016.

The wage will increase to $9.15 on July 1, 2017, and then to $10.10 on July 1, 2018.

The ordinance has been codified as Chapter 13A of the Lexington-Fayette Urban County Code of Ordinances. The text of the ordinance is available online. For questions about implementation, contact the City of Lexington’s Legal Department at (859) 258-3500.

You can download and print the minimum wage poster to display for employees.​Currently, a lawsuit is pending before the Kentucky Supreme Court, challenging the legality of local wage mandates. Two statewide business associations filed suit against the City of Louisville after the passage of a similar ordinance to increase the local minimum wage above the state level. The Court has not issued a decision as of the time of this post.

On April 15, the Kentucky General Assembly wrapped up the 2016 60-day legislative session with a budget agreement (HB 303) for FY 16-18 that included no tax increases and made pension funding a priority.

This session, Kentucky Governor Matt Bevin and legislative leaders on both sides of the aisle committed to addressing the state’s pension issue. With an estimated $36 billion in unfunded liability, Kentucky’s public employee pension system ranks among the worst-funded in the nation. The budget compromise prioritized more than $1.2 billion to the state’s troubled public pension systems for state employees (KERS) and teachers (KTRS). Along with the additional funding, the Governor’s proposed “permanent pension fund” received $125 million to help address future issues.

The 9% cuts the Governor proposed for most state cabinets and agencies remained in the final version of the budget, although some keys areas – including the basic school-funding formula, K-12 programs and Medicaid – were shielded from those cuts.

A compromise was reached on funding for higher education. The state’s public universities and community and technical colleges will be subject to 4.5% cuts each year of the biennium. That amounts to a $12.6 million reduction in UK’s base appropriation each year.

A performance-based funding model for the state’s colleges and universities was also included for FY 18. The proposal takes 5% of each university’s remaining base appropriation and places it in a performance funding pool. The rules of how each institution earns back all or a portion of that 5% will be worked out through a working group that will report back to the Governor and the Interim Education Committee by Dec. 1, 2016.

The budget agreement also gives UK agency bond authority for $150 million for the UK Hospital and $60 million to renovate and modernize some academic buildings in the core of campus.

The Governor’s proposed $100 million bond pool for workforce development projects remained part of the budget agreement. However, legislative leaders added specific project criteria including allowing only one project per congressional district.

The House Democratic Majority’s proposed “Work Ready” scholarship program received $25 million in funding. The program provides 2-year free tuition for a certificate or associate’s degree from any postsecondary institutions that are 2-year public, 4-year public, and private, non-profit postsecondary institutions (not proprietary schools).

An additional $175 million was set aside in the state’s Rainy Day Fund to address any emergency situations.

Legislative leaders also included $60 million in state funds for an investment partnership for the expansion and renovation of the Lexington Convention Center. On the final day, a bill was approved (language from HB 441 sponsored by Rep. Ruth Ann Palumbo) authorizing the Urban County Council to increase Fayette County’s transient room tax an additional 2.5 cents for the local financing part of the $250 million project. A portion of this tax will be dedicated back to the state for repayment of the $60 million investment. The tax sunsets upon repayment of the debt for the project.

At the time of print, it was unclear if Governor Bevin would line-item veto any items from the budget bill. The Governor had 10-days to consider vetoes after receiving the budget bill on April 15.

In addition to a budget, other priority issues for Commerce Lexington Inc. that passed this session include public-private partnerships (HB 309), felony expungement (HB 40) and hospitality modernization (SB 11).

Key highlights from last week's legislative session include deadlock on budget talks as well as the passage of felony expungement and alcohol tourism modernization legislation.

Budget Talks Deadlock | Final Legislative Day April 12On the 59th day of the 60-day session, negotiations between House and Senate leaders ended without an agreement on the state's next two-year, executive branch budget (HB 303). The good news is that both House Democrats and Senate Republicans recognize the urgency for addressing Kentucky's looming unfunded liability for the state pension plans. However, the basic differences in the proposals have kept legislators from reaching a compromise during the conference committee process. Overall, Senate Republicans have a more conservative, structurally balanced spending plan that includes cuts to most state agencies in order to make larger contributions to the state's financially troubled pension funds. On the other hand, the House Democrats' proposal relies on the use of one-time, non-reoccurring money in order to avoid cuts to important policy areas like higher education.

The major sticking points are: 1) the amount of funding - beyond actuarial required contributions - to contribute to pension funds; and 2) restoration of cuts to higher education. During negotiations, it seemed both sides were ready to compromise on restoring funding to K-12 programs and in providing some level of funding for the Governor's proposed "permanent fund" to address future pension issues.

Senate leaders supported the Governor's proposed 9 percent cuts to higher education, but leadership offered a counter proposal to House leaders that lessened the cuts to 4.5 percent over the biennium. House leaders rejected this proposal. After the breakdown in budget talks, the Governor enacted an Executive Order calling for immediate 4.5 percent cuts to the state's public universities and community and technical colleges for the current year. Attorney General Andy Beshear held a press conference following this action challenging the Governor's authority to impose current year cuts and threatening a lawsuit if the Governor doesn't rescind the order by this Friday.

Although many Capitol observers predict the session may end without a budget, the reality is that it isn't over until it's over. Budget negotiations are expected to continue informally over the veto recess period. Lawmakers will return on Tuesday, April 12, for the final legislative day of the session.

With less than 9 legislative days remaining in the 60-day session, state budget negotiations continue to be the priority issue. Although time is running short, several priority issues important to the chamber remain alive in the process - including public-private partnerships felony expungement, hospitality modernization, LIFT (local option sales tax), workers compensation reforms and legislation to increase transparency over ADD's.

House Passes State Budget Bill Last week, the House Democratic Majority passed its version of the next two-year $21 billion state budget (HB 303). The bill passed the full House last Wednesday with a vote of 53-0 as House Republican members declined to vote on the measure.

The House budget bill proposal differed from the Governor's budget largely in that it restored cuts to state universities, various programs for public schools, some state agencies and provides for work ready scholarships. HB 303 eliminated $100 million in state bond funding for workforce development projects.

Like the Governor's proposal, the House budget fully funds the over $1 billion in actuarially required contributions to the ailing public pension systems for teachers and state employees (KTRS and KERS) without bonding. The House budget also included the Governor's proposed $60 million in state bond funds for the renovation and expansion of the Lexington Convention Center.

This past week, a priority issue for Commerce Lexington Inc. advanced in the legislative process. Local option sales tax legislation (HB 2) - known as LIFT - passed out of the House with bi-partisan support. The bill amends Kentucky's Constitution to allow local governments to enact up to an additional 1% sales tax for specific, voter-approved capital projects. Enabling legislation (HB 374) detailing how the local option sales tax would be implemented at the local level also passed out of the House. Both bills head to the Senate for consideration.

Democrats Retain Majority in House:Special elections for four vacant House seats were held last Tuesday. Democratic candidates won 3 of the 4 seats and maintained the party's majority in the House (53-47). The new members are expected to be sworn in this week.

Lexington Convention Center:Legislation critical to the expansion and renovation project of the Lexington Convention Center, continues to await action in the Senate. HB 441, sponsored by Rep. Ruth Ann Palumbo, has been assigned to the Senate Appropriations and Revenue (A&R) Committee. The bill provides authorization to the Lexington-Fayette Urban County Council to increase the transient room tax in Fayette County an additional 2.5 cents for the local financing part of the $250 million project. In his budget proposal, Governor Matt Bevin provided $60 million in state funding for an investment partnership with the City of Lexington for the project. The arrangement includes a guaranteed repayment of funds to the state using .5 cents of the transient room tax. Funding for the project is anticipated to be included in the House budget proposal.